Supreme Court ruling could herald the return of illegal rentals, Algarve hotelier warns
A Supreme Court ruling has been called a “bombshell” for the AL (Alojamento Local, or short-term tourist accommodation) sector. But is it?
Last week, the Court announced the “uniformization” of a decision regarding the AL regime – owners must not rent a residential unit subject to a certificate of division (called “horizontal propriedade” in Portuguese), which is intended to “housing”, within the AL scheme.
The Supreme Court’s decision was unanimous, said Audiencewith nearly 30 judges supporting him.
Audience The newspaper ran it exclusively, but it was quickly picked up by other media sources – the simple reason being that it could potentially create a tidal wave of trouble, and indeed it caused widespread panic in the AL sector.
Senior Judge Paulo Rijo Ferreira has admitted the number of cases likely to expose AL activity in ‘residential’ apartments could now snowball – when there are real ‘economic risks’ to the horizon.
If people can’t rent the apartments they bought in good faith for this type of investment, they may very well choose to rent them illegally – that’s the problem – which means the state could lose hundreds of thousands or even millions of euros in tax revenue.
This is certainly the opinion of Hélder Martins, the new president of the Algarve Hotel Association AHETA, who believes that the Algarve will be seriously affected by this decision.
The ‘infamous parallel beds’ (illegal vacation rentals) of the past (before the introduction of the AL regime) ‘will definitely come back’, he warned in an interview with lusa Monday.
Eduardo Miranda of the AL association did his best to downplay the prospect of damage to the sector, saying he feared “the consequences of media coverage” much more than the likelihood of an “avalanche of cases” before the courts.
“What this decision says is that in disputes that end up in court, preference will be given to condominiums,” he explained last week. “But in the 2018 law, this question ended up being largely circumvented. In order to avoid conflicts in court, the law has created a mechanism, called ‘opposition’, which allows the co-ownership to make a request for cancellation (of an AL), which is simple, free and relatively easy” , did he declare.
And, he pointed out, this mechanism has allowed very few cases to go to court, as they can be resolved easily through arbitration.
Be that as it may, this is a court decision which aims to standardize the AL regime (see box). It follows previous conflicting court rulings, according to Idealistic: in 2016, the Court of Appeal of Porto ruled that landlords could choose to rent their properties to whoever they wanted, the AL activity being “compatible” with permanent residence; another (from the Lisbon Court of Appeal), also in 2016, ruled in favor of people who live in apartments intended for habitation and found themselves having to share it daily with strangers who frequently made noise beyond “normal hours”.
The Supreme Court’s latest decision aims to standardize AL activity.
Judge Rijo Ferreira was quoted as expecting “significant disruption” in the AL sector (there are 101,534 “local alojamentos” units registered in Portugal, of which 65,750 are classified as apartments), while lawyers questioned said they too considered the decision a “bomb”.
André Miranda (no apparent relation to Eduardo Miranda) – an associate of Pinto Ribeiro Advogados – said the Supreme Court’s decision will “increase” the likelihood of success in future trials, although these will have to be analyzed on a case-by-case basis. case.
Vítor Amaral, president of the Portuguese association of condominium management companies, also believes that the decision will lead to “a greater legal conflict”. He expects “a lot more discussion on this issue in the next condominium meetings”, which already deal with the new rules for the operation of condominiums as they are, he said.
WHAT THE SUPREME COURT DECIDED
The wording of the Supreme Court’s decision establishes that “in the regime of horizontal property (properties subject to a certificate of division), the indication in the constitutive title that a certain construction unit (“fração autónoma” in Portuguese) is intended for habitation must be interpreted in the sense that the Tourist rentals are not allowed”.
The decision essentially means that apartment/condo residents who complain about after-hours noise, increased dirt and wear and tear in common areas, strangers’ access to garages and residential properties are well within their rights and should not have to put up with AL in a setting designed for permanent residences.
But there are still a lot of gray areas.
For example, according to Audience, the Supreme Court judgment does not establish law. Nevertheless, this raises the question: can and should local authorities continue to grant new AL licenses in buildings whose title deed is permanent residence?
Other questions relate to, should the local authorities ask for the title deed of the property? Should they completely ignore the decision? What does the ASAE (Health and Safety Agency) checks ruling mean?
THE GOVERNMENT ADMITS TO ANALYZE THE SITUATION
Officially, the government says it “does not comment on court decisions and does not consider it appropriate to comment on the impact of (this) particular decision,” said the Secretary of State for Tourism, Trade and to Services, Rita Marques. Audience.
But she conceded that it will be a matter of “analyzing the subject” for the obvious reason that the consequences are potentially very dramatic – notably the likelihood of loss of tax revenue if owners flee the AL regime.
As media sources resume public history have pointed out, henceforth, according to the judgment, anyone living in a condominium intended for “habitation” will feel more empowered to demand an end to this type of activity in the building in which they reside – independently because this LA has been operating for years”.
Lawyers are already predicting that the court cases could take years before a resolution is reached.
What does this all mean and what could it mean for rental property owners?
The decision cannot be applied to individual villas, even if they are part of a residential condominium, since they have not been the subject of a certificate of division (propriedade horizontal).
The decision was clearly designed for apartment buildings intended for habitation, but could potentially apply to townhouse-style properties in condominiums developed for residential use that fall under the same classification (horizontal propriedade) as the apartments.
However, AL licenses on properties potentially exposed to the ruling are still valid and will remain in place until a formal complaint is filed with authorities, in which case an AL license may be revoked.
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